Flux Power Holdings, Inc.

Greetings and welcome to the Flux Power Holdings Third Quarter Fiscal Year 2024 Financial Results Conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to hand the call over to Maria Rico, Marketing Manager. Maria?

Thank you, Operator. Your hosts today, Ron Dutt, Chief Executive Officer, and Kevin Royal, Chief Financial Officer, will present results of operations for fiscal third quarter ended March 31, 2024. A press release detailing these results crossed the wire this afternoon at 4.01 p.m. Eastern Time and is available in the investor relations section of our company's website, fluxpower.com. Before we begin the formal presentation, I would like to remind everyone that statements made on the call and webcast may include predictions, estimates, or other information that might be considered forward looking. While these forward looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events. Throughout today's discussion, we will attempt to present some important factors relating to our business that may affect our predictions. You should also review our most recent form, 10-K, for a more complete discussion of these factors and other risks, particularly under the heading Risk Factors. At this time, I will turn the call over to FluxPower Chief Executive Officer Ron Dust.

Thank you, Marina, and good afternoon, everyone. I'm pleased to welcome you to today's fiscal third quarter 2024 financial results conference call. To begin, I would first like to call out our headline themes and then go on to step through supporting context and color. We have experienced delays in new orders since this past January. driven by revised timing of forklift deliveries, which impact timing of our orders and shipments. We see indications in our market sector of the impact of higher interest rates and economic uncertainty during this calendar year. While we don't get specific guidance, we are aware of signs of potential abatement of the headwinds later this calendar year. We have been undertaking specific initiatives to increase revenue growth, reduce costs, launch new high-demand products, and ensure our pricing is appropriate for all our models. Put simply, our two high priorities are revenue growth and reaching profitability. Our reputation in the market. and with sustaining Fortune 100 customers we have, provide evidence of our value proposition along with over 22,000 flux power lithium ion packs operating in North America. Turning to fiscal third quarter of 2024 results, we did experience reduced revenue of $14.5 million versus 15.1 million in the year-ago quarter. This reduction in revenue comes following our highest quarterly revenue ever of 18.3 in the fiscal second quarter of 2024 this year. Regarding our gross margin, the fiscal third quarter of 2024 decreased slightly to 30% and our adjusted EBITDA was a loss of $1.4 million compared with a loss of $700,000 in that year-ago quarter. Our backlog has seen a similar impact with reduction to $18.5 million from $25 million a year ago. Regarding our customer base, we have no known lost customers and no lost orders to competition. Furthermore, we have not seen any pullback from interest in migrating to lithium ion solutions. Despite our current higher interest rate environment, we believe the trend of flight-wide migration to lithium ion solution is still advancing, and microcapital spending trends remained intact as evidence by the Institute of Supply Management Survey released this month, showing that manufacturing grew for the first time in one and a half years in this past March. To support revenue growth, we're expanding our sales force and implementing marketing initiatives to expand awareness of both the value proposition to customers and capabilities of flux power to impact their fleet operations. Our solutions provide increased performance of forklifts, product lifecycle cost savings, asset management improvements from our leading telemetry, and carbon dioxide reductions to the environment. We also provide integration of most brands of charging equipment to our packs, to our lithium battery packs, and provide an integrated solution for the customers. I would like to reiterate that we are highly focused on expanding sales and marketing initiatives to secure new customer relationships and support our customers' continued migration to lithium with their typical very large fleets. Additionally, we're working with our distribution partners to acquire new customers which includes sales and marketing resources and materials and getting our salespeople closer to end customers and their needs as we collaborate with our dealers and distributors. Also, we're taking several actions in support of our targeted sales trajectory. These include new product launches of heavy-duty models, addressing customer demand, adding salespeople to support new customer acquisition, and increasing our marketing resources and initiatives. Importantly, we are launching a new private label program this quarter with another top tier forklift OEM. As mentioned earlier, we're also taking actions to increase our gross margins including cost reductions company-wide and selected pricing increases reflecting our total value add to products and services for our customers. We are pleased to report on our continued progress in expanding technology and partnerships. Prototype testing of our fast charging technology is scheduled to take place this summer. Separately, we are launching the automation of modularization of battery cells, which should improve our working capital management. We are working with new potential customers to implement second-life use of our packs that are reaching the end of their initial application. This would include stationary storage opportunities for those packs. We have an initiative with one of our Fortune 50 long-term customers to implement a nationwide installation of telemetry, which we call our SkyDMS. And this is all to improve customer asset management. Our software and cloud accessibility includes the development of an application of machine learning and AI features for product support tailored to large fleets. Now, I do want to mention two of our recent appointments. I'm also pleased to highlight our new CFO, Kevin Royal, who joined in early March this year, and also our newly elected board director, Mark Leposki. They both bring impressive depth of experience, successfully building high-growth businesses, and are key resources to achieve our strategy of scaling our business with top-tier customers. In the longer term, our strategy revolves around building scale to sell our packs, products to large fleets, building on our momentum in revenue, gross margin, and operating leverage. Currently, we're growing organically within our capital resources industry, but have begun to explore and develop strategies, including those already mentioned, to build partnerships that can leverage revenue growth, technology, and profitability, and achieve our goal of building scale to meet the needs of our customers. As I mentioned earlier, adjusted EBITDA loss of $1.4 million during the fiscal third quarter resulted primarily from the impact of lower revenue and a one-time warranty-related expense. As presented in the previous slide, we are experiencing a pause, you would call it, due to the higher interest rate environment, yet we do see signs of a gradual return to our growth rate in the second half of calendar 2024. Our current customer base continues to reflect large fleets of well-known companies seeking the value proposition of higher performance, lower lifetime costs, and asset management tools and services. Our full product line caters to large fleets who seek ongoing relationship partnership to meet current and future needs, not just one-time transactional purchases. These customers represent well-known household names having large fleets who require high-performing suppliers who provide best-in-class products and especially services. While the forklift growth rate has historically been single-digit, the adoption of lithium-ion batteries is growing at a much higher rate, driven by the compelling value proposition of lithium compared to lead acid. and propane for that matter, and especially in larger multi-shift operations. The material handling sector is not unaffected by economic downturns, but it is critical to support, to transport goods and provide services throughout the business cycle. Our strategy includes adjacent verticals such as airport ground support equipment, referred to as TSE, and we continue to explore additional adjacencies to leverage our core competencies and capabilities. Gross margin initiatives have dramatically improved over the last two years, and we expect continued improvements. Growth profit was down slightly during this third quarter to $4.4 million, and gross margin held steady at 30% compared to the year ago. With strategic supply chain and profitability improvement initiatives, achieving lower costs and higher volume purchasing, we are targeting gross margin improvement to continue with a long-term goal of exceeding 40%. All these initiatives are part of our plan to accelerate gross margin and reach our target goal. As of May 6, 2024, our open order backlog was 18.5 million. Our backlog reflects longer lead times of incoming purchase orders from major OEMs to align with their schedule of new forklift deliveries and extended delivery times for certain model lines for new GSE equipment. Beyond our backlog of open orders, the future continues to look bright with growth of current customer adoption and new customer potential acquisition. With that, I will now turn it over to Kevin Royal, our newly appointed Chief Financial Officer, to review the financial results. Kevin?